Bitcoin mining: stocks on the rise again

There are several bitcoin mining companies in the US whose shares are listed on the stock exchange. 

Of course, the prices of these shares fluctuate in line with the price of BTC, so it is not surprising that 2023 will be a more than good year for them. 

The 2023 rise of bitcoin mining stocks

Let’s take Nasdaq-listed Marathon Digital Holdings’ MARA shares as our first reference. 

They started the year at around $3.4, but by mid-January they had risen to almost $8.

This rise continued in April to almost $12, and then again in June and July to over $19. Since then, however, it has fallen back to around $9.2. 

Another similar company is Riot Platforms, whose stock RIOT is also listed on the Nasdaq. 

The parabola is similar, starting the year at $3.4, rising to $7.5 and then $13.5, peaking at over $20 in July and then falling to the current $11. 

It should be noted that in both cases there was a sharp fall back to below $9 in October after the July peak. However, with the rise in Bitcoin to over $35,000, they have risen again, with gains of +21.4% and +26.7% respectively in recent weeks.

What is surprising, however, is that in both cases, the year’s high was reached when BTC was below $32,000, whereas now that it is around $35,000, MARA and RIOT are trading at around half that level.

The exceptions

However, not all bitcoin mining-related stocks followed a similar parabola. 

Argo Blockchain’s ARBK, for example, started the year at around $1. Having already soared to $2.7 in January, it then began a downward lateralisation that brought it to its current $1.1. In other words, it has gained almost nothing so far this year. 

A similar parabola has been followed by Canaan’s CAN shares, while Hive Blockchain Technologies’ HIVE shares have followed a sort of middle path. That is, HIVE has followed a similar trend to MARA and RIOT, but its current price is below its January peak. Hut 8 Mining’s HUT has also followed a similar path. 

In contrast, both Bitfarms’ BITF and Bit Digital’s BTBT have followed a similar parabola to the industry leaders MANA and RIOT. 

This shows that it is not just the price of bitcoin that is influencing the price movements of these stocks, not least because these are productive companies in their own right that may be suffering from a whole range of other problems that may not affect bitcoin. 

Increased competition

Perhaps the biggest issue is the massive increase in competition that has occurred over the course of the year. 

Although this increase in competition is not so much due to the entry of new major players, but simply due to an increase in the hashrate, it is important to remember that mining is a competition. 

Therefore, if some players increase their computing power while others do not, it is as if the competition has increased for them. 

Moreover, compared to 2021, when the Chinese mining ban caused all Chinese miners to disappear almost overnight, the Chinese miners are back now, albeit with a smaller share than before. 

Add to this the fact that the premium for miners will be halved next April with the fourth halving of bitcoin, and it becomes clear that the most ailing miners may even be in danger of disappearing. 

All of this goes far beyond the price of bitcoin, so there are other factors to consider when trying to interpret the price performance of mining-related listed securities.

Bitcoin mining stock gains: the energy issue

It should not be forgotten that there is a real energy problem at the heart of bitcoin mining. 

Indeed, energy consumption is high, and this implies significant costs. 

If the price of the raw material, i.e. electricity, rises significantly, but to different degrees for different players in the sector, miners for whom the increase is too high will be forced to switch off their machines and stop mining. 

It is no coincidence that during the course of last year, as the market value of BTC fell and the price of electricity rose, some mining companies went bankrupt. And even those that held on saw their stock market value plummet. 

MARA shares hit an all-time high in November 2021, not coincidentally at the same time as bitcoin, at almost $76. They then plummeted to $5.5 in just over six months, before falling back to $3.4 by the end of 2022. In other words, over the course of 2022, they ended up losing 95% of their highs. 

However, it should also be remembered that at the end of 2020, before the last big bull run, they were only worth $2, so even after the bubble burst they never returned to pre-bubble levels.